India’s Petronet LNG said on Wednesday its deal to buy 1.25 million tonnes of liquefied natural gas from Qatar’s Rasgas will run from July 2007 to March 2008, with an option to double the contract size.

The LNG will be delivered over nine months to Petronet’s Dahej terminal in western India, and will be supplied by a new pipeline to Maharashtra’s Dabhol power plant, which has been running on more costly naphtha.

The first shipment is due to arrive on July 7.

The Indian firm’s Managing Director, P Dasgupta, said the deal, signed on Tuesday, could be extended until December 2008, which would double the volume of LNG supplied.

Dasgupta said the company would consider its option to extend the deal early next year, depending on prices.

“Since the LNG situation is very volatile vis-a-vis pricing and not availability, we thought in our wisdom we would not rush in to cover April to December,” he said.

Petronet LNG has been asked to ensure the supply of LNG for Dabhol until September 2009, when state gas transmission company GAIL (India) Ltd will take responsibility for supplies.

While refusing to give the value of the Rasgas deal, Dasgupta said the firm would supply the LNG to Dabhol at $4.93 per million British thermal units (mmBtu).

“The contract is at a fixed price and the price at which we have done it permits me to sell at $4.93/mmBtu.”

Industry sources say spot LNG cargoes delivered to the major buyers in North Asia are valued at $8.00 to $8.50 per mmBtu on a delivered basis, although spot sales into India are pegged nearer $6 per mmBtu thanks to the freight savings.

A 570 km (360 mile) pipeline linking Dahej and Dabhol should have been opened by GAIL at the end of June but work has been held up by bad weather.

A GAIL official said work should be completed within the next two days as the weather cleared.

In 2006-07, Indian Oil Corp imported 240,000 tonnes of naphtha for Dabhol and arranged 23,000 tonnes from domestic sources. Since the beginning of this fiscal year on April 1, IOC has imported 150,000 tonnes of naphtha for the power plant.

Last month, India’s Oil Secretary, M S Srinivasan, said Petronet was trying to seal a 25-year deal with Algerian national gas firm Sonatrach to source 1.25 million tonnes of LNG annually.